F&O strategy: Bull spread on McDowell for the February series

Nandish Shah of HDFC Securities recommends to Buy McDowell 1150 CALL and simultaneously Sell 1200 CALL of the February expiry.

Derivative Strategy

BULL SPREAD Strategy on MCDOWELL

Buy MCDOWELL (29-FEB Expiry) 1150 CALL at Rs 26.7 & simultaneously sell 1200 CALL at Rs 10.4

Lot Size 700

Cost of the strategy Rs 16.3 (Rs 11,410 per strategy)

Maximum profit Rs 23,590; If MCDOWELL closes at or above Rs 1200 on 29 Feb expiry.

Breakeven Point Rs 1166.3

Risk Reward Ratio 1:2.07

Approx margin required Rs 28,000

Rationale:

• Long build up is seen in the MCDOWELL Futures where we have seen 5 per cent rise in OI with price rising by 1.34 per cent.
   
• The stock price has broken out on the daily chart, to close at all time high levels
   
• The stock price has been forming bullish higher top higher bottom formation on the weekly charts.
   
• Oscillators like RSI and MFI are in rising mode and placed above 60 on the daily chart, indicating strength in the stock.

Note: It is advisable to book profit in the strategy when ROI exceeds 20%.

Disclaimer: Nandish Shah is Sr. Derivatives & Technical Research Analyst at HDFC Securities. He doesn't hold any position in the stock. Views are personal.